IPO Watch: Nathan Tinkler's shadow hovers over copper miner Austral Resources as $30 million IPO debuts

Austral Resources (ASX:AR1) was about to rejoice in its successful listing on the ASX after raising $30 million to float the Lady Annie copper project in Queensland historic Mt Isa copper mining district.

What a time for the skeletons to emerge from the closet in the form of former JV owner Nathan Tinkler.

The company’s annual reports show Tinkler’s Bentley Resources picked up the operations off Hong Kong listed CST Group in 2019 and promptly brought current Austral executive director Dan Jauncey’s Yellow Gear on as a 49% owner.

According to its 2020 annual report, Tinkler’s share of the mine, which hit financial difficulty as copper prices tumbled during the pandemic, was traded to Yellow Gear.

In a report in The Australian, Tinkler revealed plans to sue for what he called “shareholder oppression”, saying the threat of insolvency and Jauncey’s alleged failure to bring equity into the operation had forced him to sell his share, which Tinkler now wants back.

In a statement to the ASX yesterday Austral acknowledged the report, saying it and Jauncey had received correspondence from solicitors acting for Nathan Tinkler threatening legal action but had not “been provided with any substantive documentation or information supporting claims made” by Tinkler.

The company’s share price copped a 12.5% hit, falling 2.5c below its 20c a share offer price on debut.

Austral’s Jauncey says Tinkler has ‘seller’s remorse’

Tinkler, a former mining, sport and racing magnate, who became Australia’s youngest billionaire on the back of his coal mining interests at the start of the 2010s, purchased Lady Annie in 2019 as he looked to recover from the collapse of his empire.

The sale was at the time shrouded in mystery, with Tinkler still barred by ASIC from holding directorships, telling Stockhead at the time he had no interest in getting back into mining.

Lady Annie ran a $7 million loss in 2019 and $22m loss in 2020, amid reports it was struggling to pay its bills. Its annual report says Tinkler’s Bentley traded its 51% stake to Yellow Gear on June 18, 2020.

But a copper bull run that resulted in record prices upwards of US$10,000/t being hit in May and subsequently October seem to have transformed Lady Annie’s fortunes.

The copper cathode producer recovered to a $2.7 million profit through the first half of the financial year and rode a wave of capital flowing for resources IPOs to complete its listing yesterday. Jauncey’s Yellow Gear owns 58% of the listed entity, which was valued at $89 million on listing.

Jauncey claims Tinkler has “seller’s remorse” and that there’d been a “big turnaround” for the business over the past 12 months.

“it’s pretty simple, Austral listed today, we’re fully funded, copper (is) at a record high. And I can completely understand why Nathan has seller’s remorse,” he told Stockhead.

Copper enjoys tight conditions

Copper prices did indeed touch all time highs last month.

While they have come off slightly, at US$9771/t yesterday operations like Lady Annie, which has a C1 cash cost breakeven price of AUD$7270/t, should be raking in the dough.

“If copper prices sit where they are we’re in a very, very strong position, you know, with a cost with a cost base of $7200AUD,” Jauncey said.

“And we’re currently sitting on a copper price today of around $13,000/t Aussie we’re doing exceptionally well.”

Austral is currently producing LME grade copper cathode from ore mined at the start of this year, which gets sold into an offtake agreement with Japan’s Marubeni Corporation for processing.

Its next big step is to begin mining at the Anthill deposit in January.

Anthill is an oxide reserve of 5.06Mt at 0.94% copper for 47,500t of contained metal. Austral expects to ramp up to a 1000t per month run rate by mid-2022, delivering ~40,000t of copper cathode over the next four years.

At prices of a bit over US$8000/t, that would have an NPV of $134 million and generate free cash flow of $160 million a year, out of a region famed for some of Australia’s largest copper mines including 29Metals’ Capricorn copper and Glencore’s Ernest Henry.

Jauncey said the fact Austral is already producing gives the junior a point of difference to other IPOs.

“We’ve got drill rigs, we’ve actually got drill pads getting cut now, drill rigs mobilising, and in fact we’ve also given (contractor) Thiess the green light for their mobilisation,” Jauncey said.

“This is one of the interesting things, that a lot of people aren’t aware of, we are a producing copper mine today.

“In fact, the guys are on site making copper cathode as we speak. So we’re not a care and maintenance play, we’re not an exploration play.

“We’ve got circa $160 to $180 million worth of infrastructure on site, we are producing copper as we speak and our focus is getting Anthill into full production.”

Focus on expansion, exploration for Anthill 2.0

Lady Annie has a broader resource base of 420,000t, but most of it is sulphide ore which its Mt Kelly plant is not currently equipped to treat, although testwork is ongoing looking into that right now.

Jauncey said early cash flows from Anthill will be used for future expansions, which could include reconfiguring the plant to process sulphide ores, and explore for “Anthill 2.0”.

“Owners in the past that have only focused on the oxides, and we’ve got sulphides sitting underneath,” he said. “So that’s where our mine life can extend very quickly.

“Anthill for us is the fuel in the gas tank to get us into either Anthill 2.0 and then run that parallel or in conjunction with our potential sulphide opportunity.”

Austral has around 1300 sq km of tenements in the Mt Isa copper district, with around 49 drill targets across its turf.

“I think you couldn’t be in a better location,” he said.

“To be honest, the fact that we have got such a big facility that when we’re full tilt with Anthill, we’re still at a third capacity.

“And that for me is is a lot of value add in itself. You’ve got Glencore is our neighbour. You’ve got 29Metals … it’s just up the road.

“You’re in that hub of rare metals area, and we’ve got over 1300 sq km of tenements in there with over 49 drill targets that we’re already aware of, and that’s without us going and doing any further exploration.”